How your payroll software can be smarter

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Payroll software is versatile and relatively straightforward – until you start scaling up…

The benefits of introducing payroll software are well-established. At a basic level, processes such as payroll and deduction calculations can be made instantaneously, accurate payslips can be generated, and returns can be sent to HMRC.

Payroll and HR

All these processes can be automated, while the software can also act as a portal for employees and former employees, allowing them to access key documents, payslips, P60s and P45s, even after they leave the organisation.

“From a GDPR perspective, these portals are super-secure,” explains Accounts & Legal director Stuart Hurst.

“All the key documents are there for staff to review at their leisure and that self-service is much nicer for both employers and employees as it removes a lot of hassle.”

There are several other key benefits:

1. Automation

Automating the payroll process ensures employees and contractors are paid correctly and on time. It also means your data is encrypted and password-protected, so no one (besides you and your team) can easily access it.

2. Ease of reporting

Making strategic payroll decisions or predicting labour costs is easier with a bit of automated help. What’s not easy is digging through all your manual work to track down your payroll information and assemble it into a report by hand. Many automated payroll software platforms will give you downloadable reports, so you can focus on making sure that everything is running smoothly and you are making the correct decisions for your organisation.

3. Reduced errors

It might seem fairly obvious, but if you aren’t manually entering data, there’s no risk of mistyping a number or copying over data incorrectly. Instead, correct data is replicated throughout your entire payroll system.

Next level payroll

At scale, payroll becomes more complex and requires a wider variety of capabilities to function optimally.

This also provides accountants and finance teams with a greater range of options and flexibility in running their payroll functions.

Batching

This feature is very useful for both businesses’ finance teams and accounting firms managing multiple clients, especially for those with a lot of single-director companies or payrolls that don’t change from week to week. Doing this enables users to process or perform a task on multiple employer or employee files with a single click. Batch processing can be used to finalise payslips, to check for coding notices and to send outstanding real-time information (RTI) and construction industry scheme (CIS) submissions to HMRC

for multiple employers at the same time.

Tracking leave

Dedicated payroll software can track staff leave and absences using a variety of methods, such as set number of days, accrued by number of working days, accrued by number of hours worked and so on. This provides visibility to both management and staff over time taken off and ensures leave is correctly monitored.

“If someone takes holiday and later leaves, the software can do calculations to pro-rate their allocation,” explains Accounts & Legal’s Hurst. “It’s not rocket science, but it’s something that takes it to the next level and it’s where it moves into the realm of HR, especially with storing information such as contracts and employee handbooks.”

Data capture

While this is an area for some that is still improving, staff portals are an increasingly effective tool in capturing employee data accurately.

“Instead of someone typing data points in several times and copying information from one form to another, the employee or employer enters that information, such as a National Insurance number, in one shot and it’s captured where it needs to be,” Hurst notes. “No-one needs to re-key it.”

“It’s not rocket science, but it’s something that takes it to the next level.” 

Common Issues

Be prudent with payroll

While payroll is not an especially complex process, there are still several potential issues that users can encounter and should look to guard against.

Poor data  collection

The way data is collected, particularly by bureaus and accountancy firms from clients, can pose issues, especially if the client insists on providing it as a spreadsheet.

That means time must be spent on educating clients, otherwise you could find yourself sifting through the data and formatting it correctly for your software.

Conversion Software

Moving data from one software package to another can cause real issues, whether it’s poor integrations or moving to a new payroll system entirely.

Data can be imported in the wrong format, or go missing entirely if not managed correctly, so the virtues of a back-up should go without saying.

This is particularly important, Licensed Member William Buckland FMAAT warns, as failing to do so can lead to incorrect calculations and affect deductions for National Insurance Contributions (NICs) and pensions.

It is worth noting that there are conversion tools and services out there, such as Paiyroll and Intsys, which can help eliminate this, but it’s still vital to examine the imported data to make sure it has taken place correctly.

Case study – linking errors lead to overpayment

A client that Accounts & Legal’s Stuart Hurst inherited was shocked to discover that it had been overpaying its staff for several months as a result of poor payroll practice.

“They were running through the HMRC portal and pushing the data onto spreadsheets and then into the accounting software itself. We picked it up, and got to the end of the year and they had overpaid £8,000 in wages across the board.

“We’re talking £50 here and there over the year for every person. They hadn’t linked their payroll to their accounting software and effectively everyone got a small bonus. We reflected it in the RTI, so it was taxed correctly.”

Issues changing payroll system

William Buckland FMAAT learned how difficult switching to new payroll software can be. Last year, he switched from HMRC’s Basic Tools system to BrightPay, which has a greater set of capabilities.

Before he could take advantage of his new software, though, he had to transfer his clients’ information from the old software.

“I needed to scale up, and since the switch it has worked fantastically well, but the problems occurred purely when it came to exporting the files from Basic Tools and importing it into BrightPay,” Buckland explains.

“I switched part-way through the year and it ought to have worked smoothly, but the biggest issue was in the National Insurance payments. It was categorising them incorrectly.”

The issue was replicated across all of Buckland’s clients, and he confirmed the problem by undertaking a payroll dummy-run.

“Fortunately, I was able to look at it and work it as it should be. I did a test run by creating it as if it was at the start of the financial year and that was correct.”

Future-proofing

Global working can make life complex

While the benefits of flexible working have been well documented, it has helped accelerate another trend: globalisation.

Companies are now more willing to employ teams dotted around the globe, giving those residing in non-western countries the opportunity to enter skilled roles without the location barrier in place.

From a payroll and HR perspective this has multiple advantages and drawbacks. On the one hand, the very best talent in the world is available, regardless of location. On the other, having distributed teams across the globe can become a headache for the payroll department and accounting teams.

Transferring money across borders is far from smooth and, if your staff aren’t freelancers, you’ll need to be an expert in the tax legislation of several countries. This has led to a growing number of global payroll software and services providers, such as Global Expansion and Globalization Partners, which have emerged to help SMEs expand to employ team members around the globe.

They offer finance and payroll teams a platform that integrates with their existing accounting software products to provide visibility of team members, wherever they are, along with compliance with local tax and HR requirements. According to Global Expansion, using this method saves businesses around 70% in costs.

Calum Fuller Calum Fuller is editor of AT and 20 magazines. He's previously served as editor of Credit Strategy, assistant editor Accountancy and began his career at Accountancy Age..

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